When to invest? – Waiting for the perfect day doesn't pay.

When to invest? – Waiting for the perfect day doesn't pay.

When is the right day to invest? Many investors search for the moment at which an investment will yield attractive returns. But the time to invest is unequivocally "now." Because waiting as an investment strategy does not pay off over the long term.

When to invest? – If you wait, you miss good investment opportunities

It is a common dilemma for investors. On the one hand, they want to strategically increase their equity holdings, but on the other, they want to tactically wait for a "better day." Even in 2019, a difficult year for the stock market, many under-invested investors waited months for a good time to enter the market. But in doing so, they missed many valuable investment opportunities.

Because – contrary to what many investors think – the best day to invest doesn't depend very much on the prevailing market conditions. It is primarily a question of principle. The search for the ideal time to invest is like searching for a needle in a haystack. Although it is not impossible to find the needle, it is very unlikely.

Timing is irrelevant for a long-term investment strategy

The following is certain: Successful investors invest for the long term. This is because price fluctuations in securities smooth out over time. The more long-term the view, the less important the date of investment thus becomes for the average performance of an investment strategy. Therefore, when you consider the big picture, the search for the "perfect day" is, strictly speaking, irrelevant.

Choosing a suitable risk profile is much more important for the success of an investment strategy than choosing the right moment to get started. You cannot be successful over the long term if the fluctuations related to your strategy do not correspond to your personal investment profile. However, if strategy and temperament are matched, success will primarily be a question of investment principles, not coincidence or start date.

How risk and returns are related

History shows us how successful long-term strategic investments are. Since 1900, Swiss equities have achieved an annual average performance of 6.7 percent per year. Swiss securities are some of the world's most successful, despite the strong Swiss franc. This is likely to be true into the future as well. However, being aware of the history of the markets allows you to better estimate your risks and opportunities. Investors need to know the following six points about the risks and returns of investments.

1. Returns increase, market fluctuations decrease On average, over the long term, the risk-adjusted returns on equities have risen since the financial crisis, while fluctuations on the stock exchange have fallen.

2. Markets are more stable than ever 14 of the 20 largest stock market crises shocked the markets before 1940. The main reason for the current stability lies in the fact that the markets are now significantly larger, lower, and more liquid.

3. Volatility is normal Between 1935 and 2018, the average volatility of the S&P 500 was 1 percent each trade week and 2 percent each trade month. However, the cumulative return was 25,290 percent.

4. Losses should always be assessed with a certain amount of distance  The daily volatility in the equity markets can be enormous in the short term, but over the long term, these movements are negligible


Short-term fluctuations are irrelevant for long-term returns

Performance of the S&P 500 between August 1990 and February 1991 (left) and the ten-year period between 1988 and 1998 (right)

Last data point: January 2019

Historical performance and financial market scenarios are not reliable indicators of future performance.

Source: stockcharts.com, visualcapitalist.com, Credit Suisse

5. To withstand volatility, investors should have meaningful diversification
The markets never stay still, and the stock exchange is hardly ever the same year to year. However, diversification ensures endurance, even in turbulent times.

6. Risk and return are two sides of the same coin
Without risk, there is no reward for investors. For example, the real returns for US investments between 1925 and 2014 were 6.7 percent for equities, 2.6 percent for government bonds, and just 0.5 percent for cash.

A successful investment strategy is no coincidence

It's clear that successful investing is not simply a matter of luck or chance. It doesn't pay to wait for a "better day." There won't ever be one. Successful investing is a craft, and regular attention to its rules leads to improved outcomes.

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